Can minimum wages contribute to poverty reduction in poor countries?

Minimum wage legislation aims to reduce poverty by raising the wages of the poorest workers towards or above the poverty line. Despite their intuitive appeal, minimum wages are controversial. The sceptics' argument that raising wages will create disemployment is compounded by the difficulties of enforcing compliance, particularly in poor countries with large informal sectors and weak public administrations. This paper draws on the 'new economics' of the minimum wage, and reviews evidence from several countries suggesting that positive impacts are achievable with negligible side-effects. The paper concludes by making a case for introducing selective minimum wages on Uganda's agricultural estates. Copyright © 2005 John Wiley & Sons, Ltd.